Phantom limbs provide valuable insight into the mechanisms underlying bodily awareness and ownership. This paper reviews the complexity of phantom limb phenomena (proprioception, form, position, posture and telescoping), and the various contributions of internal constructs of the body, or body schema, and neuromatrix theory in explaining these phenomena. Specific systems and processes that have received little attention in phantom limb research are also reviewed and highlighted as important future directions, These include prosthesis embodiment and extended physiological proprioception (i.e., the extension of the body's "area of influence" that thereby extends one's innate sense of proprioception, mirror neurons and cross-referencing of the phantom limb with the intact limb (and the related phenomena of perceiving referred sensations and mirrored movements in the phantom form the intact limb). The likely involvements of the body schema and the body-self neuromatrix, mirror neurons, and cross-callosal and ipsilateral mechanisms in phantom limb phenomena all suggest that the perception of a "normal" phantom limb (that is, a non-painful phantom that has the sensory qualities of an intact limb) is more than likely an epiphenomenon of normal functioning, action understanding and empathy, and potentially may even be evolutionarily adaptive and perhaps necessary. Phantom pain, however, may be a maladaptive failure of the neuromatrix to maintain global bodily constructs.